Endogenous sequencing in strategic trade policy games under uncertainty

Authors

Kit Pong WONG, University of Hong Kong
Kong Wing, Clement CHOW, Lingnan College, Hong Kong

Document Type

Journal article

Source Publication

Open Economies Review

Publication Date

10-1997

Volume

8

Issue

4

First Page

353

Last Page

369

Publisher

Kluwer Academic Publishers

Keywords

Commitment, Endogenous timing, Flexibility, Strategic trade policy

Abstract

This paper examines a strategic trade policy game with endogenous timing. A trade-off between commitment and flexibility is identified. The equilibrium timing of trade policy decisions is shown to highly depend on the degree of demand uncertainty. When demand uncertainty is low, countervailing duties will never be used because the home government always sets its import tariff before the foreign government sets its export subsidy. When demand uncertainty reaches a threshold level, the home government starts to find it optimal to move second with positive probability. As a result, we provide an economic rationale for the prevailing use of countervailing duties in practice.

DOI

10.1023/A:1008291013212

Print ISSN

09237992

E-ISSN

1573708X

Publisher Statement

Copyright © 1997 Kluwer Academic Publishers

Full-text Version

Publisher’s Version

Language

English

Recommended Citation

Wong, K. P., & Chow, K. W. (1997). Endogenous sequencing in strategic trade policy games under uncertainty. Open Economies Review, 8(4), 353-369.